Euroarea headline inflation likely remained stable at 0.5 pct in November

The euro area inflation is likely to have stayed stable in November. According to a Societe Generale research report, the currency bloc’s headline inflation is expected to have remained at 0.5 percent year-on-year. The energy component is expected to have fallen in November to -1.4 percent year-on-year after improving for three consecutive months from -6.7 percent year-on-year to -0.9 percent in October.

The subdued energy reading shows the renewed softness witnessed in energy prices in the initial couple of weeks in November, although they might have rebounded slightly in the more recent times. On  the contrary, the pick-up seen in the last few months in EU internal market prices is expected to pass  through to consumer prices, which might result in a slight rebound in euro area’s food prices, noted Societe Generale.

Meanwhile, euro area’s core inflation, which is yet to indicate any evident signs of upward momentum, to remain stable for the fourth straight month at 0.8 percent year-on-year. Services inflation is expected to remain stable while non-energy industrial goods prices are expected to weaken slightly. However, the recent rebound witnessed throughout the several surveys published to date, appears to indicate towards rebounding inflationary pressure in months ahead.

The currency bloc’s headline inflation is expected to move above 1 percent by early next year. Base effects from energy prices are likely to drive the upward movement in inflation.

“We expect headline inflation to average 1.5 percent in 2017, with the core metric improving marginally to average 1.0 percent in 2017”, added Societe Generale.

At 09:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 41.5214, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -21.196. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex